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Global Patenting Trends: Rise of China

China’s rise as an economic superpower has been driven by the rapid pace of technological innovation, as evidenced by the recent surge in Chinese patent filings, patent grants, and patent enforcement actions. In large part, these trends have been fueled by foreign and multinational companies, who, recognizing the importance of the Chinese market to their business and the recent strengthening of the intellectual property rights (IPR) protection and enforcement regime by the Chinese government, actively patent and enforce their IP in China.

The volume of patent filings in China has been increasing dramatically in the past decade. China has, in fact, surpassed the traditional top patent filing jurisdictions, such as the US, Europe, Japan, and South Korea, in the number of newly filed patent applications. As seen in the chart below, the number of patent applications for inventions filed in China in 2018 is nearly 1.6 million, which is greater than the number of new applications filed in the other top four patent offices, combined. Patent filings by foreign applicants in China are also on the rise and, in 2018, accounts for about 400,000 applications, which is exceeded only by the number of patent applications filed by foreign applicants in the US The largest non-domestic patent filers in China for 2018 include Ford (2674), General Motors (1559), and General Electric (744) according to statistics from Derwent Innovation. 

2020 Patent Chart_Legal Alert

 1 Complete file statistics for 2019 were not available at the time of drafting this article.

Despite this surge of patent filings, China’s National Intellectual Property Administration (CNIPA) manages to efficiently process new applications. In 2018, the average processing time for high-value patent applications was about 17.3 months, and the CNIPA promises to cut this time to 13.8 months by 2022.2 This efficient processing occurs while maintaining a relatively low average patent grant rate (28% in 2018) to assure high quality in issued patents. Even so, the patent grant rate for applications filed by non-resident applicants was 58.2% in 2018 - more than double the total rate. This indicates that while China does not hand out patents easily, non-resident applicants have had a fair amount of success in acquiring Chinese patents and may be able to acquire such patents even more quickly in the near future.

Furthermore, following the USPTO’s example, the CNIPA has been relaxing its patentability requirements for software inventions to allow patentability of a broader spectrum of emerging software technologies. Not surprisingly, China is quickly becoming a technological hub. In 2017, China led the world in most applications filed in each of the following categories: artificial intelligence, blockchain, cybersecurity, virtual reality, and autonomous driving.3

Patent litigations in China are becoming even more important due to the strengthening of the IPR enforcement laws by the Chinese government and courts. Contrary to the belief that foreign companies may not get a fair shake in Chinese courts, a 2017 study that analyzed 1,663 patent infringement cases brought in China showed that foreign plaintiffs had an 84.35% win rate over Chinese defendants. Furthermore, the average damages awarded to foreign patent owners (¥201,620.45, or US$32,837.21) were nearly triple the amount won by Chinese patent owners (¥66,217.93, or US$10,784.68).4 Moreover, new regulations being proposed by the Chinese government would mandate the statutory damages for patent infringement to increase from their current levels, between 10,000 RMB to 1 million RMB ($1,550 to $155,000), to between 100,000 RMB and 5 million RMB ($155,000 to $775,000).5

All in all, the implication is that companies outside of China should definitely consider expanding their IP outreach to China. The rapid growth of the Chinese IP market and rise in international innovation should be strong motivations for tech companies, including those who presently do not do business or sell products in China - after all, there is no requirement for patent applicants to do business in China and the term of a patent is a lengthy 20 years. The statistics provided above clearly show that anything can change in two decades. Not to mention, IP portfolios with foreign patents showcase diversity to multinational tech companies and private equity firms looking for acquisitions and investments.

Arent Fox is one of the few go-to firms for novel and high-profile patent issues. Our Intellectual Property group includes over 60 full-time patent professionals with over 30 years of experience in obtaining valuable patents for clients around the world, including in China. Our patent attorneys and agents have a wide range of technical and science degrees and industry experience. We have obtained hundreds of Chinese patents and manage thousands of Chinese applications for our clients. We specialize in managing global patent portfolios for our clients, enforcing their patents in the US and worldwide, and counseling them in IP sale and licensing transactions.

1 World Intellectual Property Indicators 2019

2 http://www.xinhuanet.com/english/2020-02/06/c_138760809.htm

3 https://vdata.nikkei.com/en/newsgraphics/patent-wars/

4 Bian, Renjun, Many Things You Know about Patent Infringement Litigation in China Are Wrong (October 1, 2017). Available at SSRN: https://ssrn.com/abstract=3063566 or http://dx.doi.org/10.2139/ssrn.3063566

5 https://www.lexology.com/library/detail.aspx?g=ed1baead-5eb8-46eb-96c8-e96cce298726

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